Market Summary:
Current ICAP Momentum/Trend Model (MOTR) Signal: NEUTRAL (Day Count = 1)
The SPX Index ran 1.83% on the day, hitting a high of 5960 and closing at 5949. The 5770 support level continues to act as support with aggressive buying above. The Index is now back within the previously identified “topping” area as internals improve. Spot VIX and VIX Term Structure have improved as well with a much more “risk on” stance. The ICAP Momentum/Trend (MOTR) Model signal shifted to Neutral. As I wrote yesterday, “the Index seems poised for some additional upside but overall, I continue to see risk as heavily skewed to the downside. Broad stroke, I see upside capped at 2-4% with downside potential of ~20% from current levels. I believe the Index is topping and that is a process.” My view has not changed. While generating profits on the upside volatility is fine, the larger trade, in my opinion, remains to the downside in the near term.
Note: I suggested Gold (GCG5) was a strong strategic Buy on Dec 24. These active contracts were trading at 2629 when I issued that note. Those contracts hit a high on Friday of 2740 for over a 4% return as the commodity breaks out of a three-month wedge to the upside.
Trade Support:
5905: Jan 15 Low
5830: Dec 20 and Jan 2 Lows
5770: Bottom of Nov 5 / Nov 6 Gap; Jan 13 Low
5700: Oct 31/ Nov 4 Lows / Bottom of Gap
5100: Intermediate Term Downside Target
4800: Intermediate Term Downside Target
Trade Resistance:
5950: Nov 7 Low
6000: Previous Support
6100: Dec 6 High